How To Make The Freemium World Pay

Screen Shot 2013-03-03 at 1.13.14 PMGuest post by Alicia Yaffe (@thespllbndgroup) for sidewinder.fm, a music and tech think tank. 

I saw a great tweet recently from a satirical Twitter account which said: “Welcome to the age where it's encouraged to pay for music before it's recorded
and take it for free once it's made.” This tweet inspired a “Eureka!” moment. The reason why charging for music before it is recorded on crowd-funding
services, such as Kickstarter and PledgeMusic, works is because it helps to create exclusivity in an industry plagued by abundance.

Recorded music has become a commodity, and the challenge to the artist is to create uniqueness within the commoditized system in order to build a
sustainable career. It’s a matter of creating value within the commodity itself, within the distribution systems, and within the positioning of your music.
Selling it before it’s recorded creates value because you’re selling a promise of greatness rather than a song itself. You’re selling the feeling
and emotion related to a great song. It’s the artist’s duty to fulfill that promise.

The music industry has failed to emulate other commoditized industries by successfully differentiating commodity product from luxury product. While this is
not a perfect analogy, people can buy a $0.99 burger at McDonald's, but many choose to pay $15.00 for a Kobe burger at high-end restaurants — for perceived
quality. “Free” water is available, yet we are willing to pay a significant premium for bottled water. Anyone could buy a $3.00 undershirt from Hanes, but
instead, many people choose to pay $29 for the equivalent garment from American Apparel — for perceived quality.

Perhaps a more appropriate analogy is television. Television creates different value propositions for programs. You pay a price for basic cable, yet
subscribers pay extra for HBO and Showtime, and expect higher quality programming in exchange. While online piracy affects television as well, this system
has translated to show distribution on the Internet. Most network programs are available for free online via legitimate sites, but not as many cable, and
even fewer premium channel programs are accessible. I believe that the music industry needs to find a way to differentiate between commodity products
(perhaps developing acts with an unproven track record), and premium products (those acts whose catalog, performances, and lifestyle products indicate a
higher quality of work.)

As it stands, music fans will pay either exactly or almost the same amount to buy a song from Lady Gaga or Churchill, or an album by the Beatles or Golden
Earrings. It’s only when artists promote other products — merchandise, concert tickets, artwork — that the brand begins to differentiate and prices become
accordingly dynamic. These are unique commodities. We have come to an age where a core product — recorded music — is no longer differentiated by price. It
is only what used to be “auxiliary” income that differentiates the artist product and removes the “commoditization” of the industry.

In a recent article, business consultant and trade writer Cortney Harding asserted that streaming shows might be a lucrative business in the future for
artists. Such shows certainly provide a unique experience, but aside from a few outlier successes, the facts suggest otherwise. The biggest, most
recognizably-branded shows streamed online — Live 8, Coachella, Coldplay’s show from Spain — were provided without charge.

To date, the only large-scale, successful pay-per-view live stream was Jon Stewart and Bill O’Reilly’s “Rumble In The Air-Conditioned Auditorium.” The show
format, featured performers, and timing of the event created the perfect environment to charge for the stream and expect it to be successful. Now, I
realize that

an announcement

recently came out of the annual MIDEM conference celebrating the achievements of a couple of notable artists —Pompalmoose, Lisa Loeb, Jason Mraz, Indigo
Girls, etc. — who made a substantial amount of money from the StageIt event platform. Kudos to them, but is it scalable? Or, should we look into what those
artists did differently (and the investment it took to get them there) in order to generate success on those platforms?

The lesson to be drawn for artists: If your show is pretty similar from show-to-show, and you have yet to develop a superstar brand, switch it up. This
will create a unique commodity for you in two arenas — the people who actually come to your show, and those who might want a good reason to pay to see your
live stream at home. Each of these performances has the opportunity to be unique just once. There is value in seeing something live, first, and with other
people. Monetizing that desire is where some unexploited opportunity lies. Even if the stream ends up online somewhere for free, fans will have missed the
excitement and opportunity to see the live performance.

The industry needs to do a better job selling our artists as unique commodities. We need to figure out how to message fans in regards to what is unique
about our artists and re-inject the status and pleasure of listening to a specific band — for longer than a hot minute. We need to invite fans to discover
and invest more in our artists. We need to work towards sustaining a larger class of “working-class” artists — those who can sustain a career in music full
time even though they might not be millionaires — rather than betting the farm on superstar acts. We need to develop their art more than their images, and
we must find a way to re-inject value into the process of making music. It’s doable, even in the digital age, and if we do it, we’ll have a healthier

Alicia Yaffe

launched The Spellbound Group in 2011 to execute unique campaigns for bands and brands to build sustainable markets. Yaffe applies her years of
expertise as the chief architect behind the integrated marketing department at Rocket Science, where she directed social media campaigns, digital sales
initiatives, and on-and-off-line events.

Sidewinder.fm is founded and edited by Kyle Bylin of Live Nation Labs. If you would like to contribute a post to be featured on the site, please reach out.

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  1. Here’s the challenge. Just about anything you can offer in addition to the music is also being offered by non-musicians.
    So you want to create a compelling show that people will pay to watch online? You’re going to compete with anything online that provides entertainment, not just musical entertainment.
    So you want to offer a compelling live show that is worth a high priced ticket? What constitutes a great live show these days often includes non-musical excitement like lights, projections, and so on. The music itself may be secondary to the total package.
    Want to offer cool merch? You’re competing with outlets that specialize in clothing, artwork, collectibles, and so on. People can listen to your music and then go out and buy someone else’s merch.
    Want to offer a fun event like a dinner with music? What if someone who specializes in food decides to focus on the food and then tosses in some music to enhance the food experience? Can you compete with them?
    In the process of giving away the music and selling the “other stuff,” it’s the other stuff that defines the value. I’m not saying there’s an easy solution to counter this. I’m just pointing out that by needing to add the other stuff to create value, the other stuff IS the value.

  2. “We have come to an age where a core product — recorded music — is no longer differentiated by price.” To be honest, I think that you can even argue that music in and of itself is no longer a product. If essentially the other sources of revenue are deriving from so many other things instead of the music itself strictly speaking, then can’t we argue that music now is simply just the marketing aspect of what is in reality a bigger brand?
    Great article by the way!

  3. If essentially the other sources of revenue are deriving from so many other things instead of the music itself strictly speaking, then can’t we argue that music now is simply just the marketing aspect of what is in reality a bigger brand?
    Yes, I totally agree. Music has become like packaging or a trademarked color. It’s what is being used to sell something else. In these situations a musician doesn’t have much to offer without pairing with another company. The musician provides the music to move something else and can either become a work-for-hire for the selling company, or a partner who gets a percentage of the sale.
    So I suppose for a marketing person who wants to work with musicians, you need to find ways to help musicians hook up with a company producing goods and services consumers want to buy. You become a broker/agent playing match-maker and collect a fee (either from the musician or the company) or a percentage of sales for your efforts in facilitating a successful deal.

  4. Hi Suzanne – that is a great point. I would argue, however, that music already competes with an overall category of “entertainment dollrs” in which it competes with other leisure activities. I agree, on a certain level, that the “otehr stuff” is the value, but I want to argue that there is also intrinsic value to music and we need to do a better job communicating that, like luxury brands do.

  5. I want to argue that there is also intrinsic value to music and we need to do a better job communicating that, like luxury brands do.
    There definitely is value in music, but getting people to pay for that value nowadays is a challenge. The usual comparison is water. People will buy bottled water even when tap water is available. They have been convinced either (1) the bottled water is better, (2) bottled water is more convenient, and/or (3) there’s status in displaying a cool bottle.
    I think there are several reasons why is it is harder to do with music than with water. (1) There’s a lot more music than there is bottled water. With water you’re mostly comparing free water to a relatively limited number of bottled brands and other drinks. But with music there is such an unlimited supply that people won’t necessarily feel they need to spend money on music given the vast amount of choice. (2) Water in some form is a necessity. People are going to drink something. So they already know they will either get free water or buy something. With music people don’t “need” it and can get all they want for free.
    I’m just tossing all of this out there to get people to think about it. I’d like to see more creative forms of music marketing, too.

  6. Hi Suzanne – again, totally agree with all your points, and the sideways comparison of music and water. I’m probably going to get attacked for this, but I think a more apt comparison is paying a psychic. You pay for the promise of what they deliver, and the belief that there is value in their services. That’s part of the messaging and the marketing that I think we’ve lost. To take that a bit further…religion is similar. The BELIEF is what matters and I think that’s what we’ve lost. We need enough believers to contribute to the community around a band to carry along those who don’t or can’t pay, but add value by participating in the community. We need to evangelize for our artists, rather than seeing who works best…I know, it’s a little crazy, but conceptually, I think that’s the comparison. To move back into the capital world, just because a product claims to be of higher quality doesn’t mean that it is. Do we pay more for American Apparel because of the belief in the importance of keeping jobs domestic? Maybe.

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